Bloomberg News

U.S. Cost of Living Probably Was Little Changed

July 17, 2012

U.S. Consumer Price Index Was Unchanged in June, Core Up 0.2%

Health and beauty products sit on display at a Dollar General Corp. store in Creve Coeur, Illinois. Photographer: Daniel Acker/Bloomberg

The cost of living in the U.S. probably was little changed in June, a sign inflation may stay subdued as Federal Reserve officials have predicted, economists said before a report today.

The forecast for the consumer price index follows a 0.3 percent drop the prior month, according to the median estimate of 81 economists surveyed by Bloomberg News. Separate data may show industrial production and homebuilder sentiment climbed.

Companies from Supervalu Inc. (SVU:US) to Chrysler Group LLC are offering incentives to boost sales as weak job gains squeeze households, underscoring limited pricing power among businesses. With inflation less of a concern, Fed policy makers have room to take additional steps to ensure the world’s largest economy keeps expanding.

“The inflation outlook is favorable,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York. “Slowing growth in the U.S. and around the world should keep prices in check. It keeps the light green for possible further easing by the Fed.”

The Labor Department will issue the consumer price index at 8:30 a.m. today in Washington. Economists’ estimates ranged from a gain of 0.2 percent to a decline of 0.6 percent.

At 9:15 a.m. in Washington, Fed figures may show manufacturing remains a mainstay of growth. Output at factories, mines and utilities increased 0.3 percent in June after a 0.1 percent drop the prior month, according to the Bloomberg survey median.

Core CPI

The Labor Department’s report may also show the core cost- of-living index, which excludes volatile food and fuel costs, rose 0.2 percent for a fourth month, according to the survey median. Compared with June 2011, the core CPI gauge probably climbed 2.2 percent, the smallest year-over-year gain since February.

Businesses may hold the line on prices as slower payroll gains and unemployment at 8.2 percent sap household spending, which makes up 70 percent of the economy. Retail sales fell for a third month in June, the longest stretch of declines since 2008, figures showed yesterday.

Supervalu, the third-largest U.S. grocery chain, plans to accelerate price reductions and cut costs by an additional $250 million over the next two years. It said dollar-store chains have grabbed more consumers.

“Consumers’ price sensitivity has intensified given the continuing weak economic environment,” Craig Herkert, chief executive officer of the Eden Prairie, Minnesota-based company, told analysts on a July 11 call. “This has led many retailers to become even more aggressive on promotions and price investment, and to step up their marketing activity.”

Auto Incentives

Automakers are also offering incentives to attract customers. Chrysler Group LLC, the automaker controlled by Fiat SpA, said it will let buyers put off monthly payments for the first 90 days in a national promotion for all of its vehicles through the end of July. General Motors Co. (GM:US) will offer no-haggle pricing on 2012 Chevrolet vehicles plus a money-back guarantee on all new Chevys, running through Sept. 4.

Several Fed officials said more action could be warranted if growth slows, risks intensify or inflation seems likely to fall “persistently” below their goal, according to minutes of the June 19-20 meeting released last week. Central bank staff “continued to project that inflation would be subdued through 2014,” the text showed.

Fed Chairman Ben S. Bernanke will address the outlook for the economy during his semi-annual monetary policy report to Congress today and tomorrow. He may hint at steps that can be taken to revive the expansion.

Stocks have declined since the end of April on concerns about the global economy. The Standard & Poor’s 500 Index has lost 3.2 percent since April 30.

Gasoline Prices

Households are getting some relief as lower fuel expenses contain the cost of living. The price of a gallon of regular gasoline at the pump averaged $3.49 in June, down 22 cents from May, according to AAA, the nation’s largest motoring organization. It has fallen further, reaching $3.40 on July 15.

The CPI is the broadest of three price gauges from the Labor Department because it includes goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.

Producer prices rose 0.1 percent in June, the first gain in four months and a reflection of higher food expenses, while the import-price index declined 2.7 percent in June, the biggest plunge since December 2008, reports showed last week.

Also today at 10 a.m., a report may show improvement in housing, which lagged the rest of the economy during the recovery. The National Association of Home Builders/Wells Fargo confidence index rose to 30 in July, the highest since May 2007, economists in the Bloomberg survey predicted.

                  Bloomberg Survey
====================================================
                               CPI     Core     Ind.
                                        CPI    Prod.
                              MOM%     MOM%     MOM%
====================================================
Date of Release              07/17    07/17    07/17
Observation Period            June     June     June
----------------------------------------------------
Median                        0.0%     0.2%     0.3%
Average                       0.0%     0.2%     0.3%
High Forecast                 0.2%     0.3%     0.9%
Low Forecast                 -0.6%     0.0%    -0.8%
Number of Participants          81       79       81
Previous                     -0.3%     0.2%    -0.1%
----------------------------------------------------
4CAST                         0.0%     0.2%     0.1%
ABN Amro                     -0.2%     0.2%     0.4%
Action Economics             -0.1%     0.2%     0.5%
Ameriprise Financial          0.0%     0.2%     0.4%
Banca Aletti                 -0.1%     0.2%     0.5%
Bantleon Bank AG             -0.1%     0.2%     0.5%
Barclays                      0.1%     0.2%     0.3%
Bayerische Landesbank         0.0%     ---      0.1%
BBVA                         -0.1%     0.2%     0.2%
BMO Capital Markets           0.0%     0.2%     0.2%
BNP Paribas                   0.0%     0.2%     0.1%
BofA Merrill Lynch            0.1%     0.2%     0.3%
Briefing.com                  0.1%     0.2%     0.0%
Capital Economics             0.1%     0.2%     0.4%
CIBC World Markets            0.1%     0.2%     0.2%
Citi                          0.1%     0.2%     0.1%
ClearView Economics           0.0%     0.2%     0.2%
Comerica                     -0.3%     0.2%     0.6%
Commerzbank AG                0.1%     0.2%     0.3%
Credit Agricole CIB           0.1%     0.2%     0.4%
Credit Suisse                 0.1%     0.2%     0.2%
Daiwa Securities America      0.0%     0.1%     0.3%
Danske Bank                  -0.1%     0.2%     0.2%
DekaBank                      0.1%     0.1%     ---
Desjardins Group              0.2%     0.2%     0.4%
Deutsche Bank Securities      0.2%     0.2%     0.4%
Deutsche Postbank AG         -0.1%     0.2%     0.1%
DZ Bank                       0.1%     0.2%     0.2%
Exane                         0.0%     0.2%     0.2%
Fact & Opinion Economics      0.0%     0.2%     0.4%
First Trust Advisors         -0.1%     0.2%     0.4%
FTN Financial                 0.1%     0.2%     0.5%
Goldman, Sachs & Co.          0.1%     0.1%     0.3%
Helaba                        0.0%     0.2%     0.2%
High Frequency Economics      0.1%     0.2%     0.4%
HSBC Markets                  0.1%     0.1%     0.2%
Hugh Johnson Advisors        -0.6%     0.0%     0.5%
IDEAglobal                   -0.1%     0.2%     0.2%
IHS Global Insight            0.0%     0.2%     0.3%
Informa Global Markets       -0.2%     0.1%     0.3%
ING Financial Markets        -0.1%     0.2%     0.2%
Insight Economics             0.1%     0.2%     0.5%
Intesa Sanpaulo               0.0%     0.2%     0.4%
J.P. Morgan Chase             0.1%     0.2%     0.3%
Janney Montgomery Scott      -0.1%     0.1%     0.3%
Jefferies & Co.               0.0%     0.2%     0.4%
John Hancock Financial        0.0%     0.2%     0.3%
Landesbank Berlin            -0.2%     0.1%     0.2%
Landesbank BW                 0.0%     0.2%     0.2%
Lloyds Bank                  -0.1%     0.2%     0.3%
Maria Fiorini Ramirez         0.0%     0.2%     0.4%
Market Securities             0.0%     0.2%     0.5%
MET Capital Advisors         -0.4%     ---     -0.2%
Mizuho Securities            -0.5%     0.1%     0.2%
Moody’s Analytics             0.0%     0.2%     0.2%
Morgan Stanley & Co.          0.0%     0.2%     0.4%
National Bank Financial      -0.1%     0.1%     0.3%
Natixis                       0.1%     0.1%    -0.8%
Nomura Securities             0.0%     0.2%     0.4%
Nord/LB                      -0.1%     0.2%     0.2%
OSK Group/DMG                 0.1%     0.2%     0.1%
Pierpont Securities           0.1%     0.2%     0.2%
PNC Bank                      0.1%     0.2%     0.3%
Raiffeisenbank International  0.1%     0.2%     0.1%
Raymond James                 0.1%     0.2%     0.5%
RBC Capital Markets          -0.1%     0.1%     0.2%
RBS Securities                0.0%     0.2%     0.1%
Renaissance Macro Research    ---      ---      0.5%
Scotiabank                   -0.1%     0.1%     0.2%
SMBC Nikko Securities        -0.3%     0.2%     0.4%
Societe Generale              0.0%     0.2%    -0.1%
Southern Polytechnic State    0.1%     0.3%     0.9%
Standard Chartered           -0.1%     0.2%     0.2%
Stone & McCarthy Research     0.1%     0.2%     0.5%
TD Securities                 0.1%     0.2%     0.7%
UBS                           0.1%     0.2%     0.3%
UniCredit Research            0.2%     0.0%     0.5%
Union Investment             -0.1%     0.2%     0.6%
University of Maryland       -0.1%     0.2%     0.3%
Wells Fargo & Co.            -0.1%     0.1%     0.3%
Westpac Banking Co.          -0.2%     0.1%     0.3%
Wrightson ICAP                0.0%     0.2%     0.5%
====================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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Companies Mentioned

  • SVU
    (SUPERVALU Inc)
    • $6.83 USD
    • 0.09
    • 1.24%
  • GM
    (General Motors Co)
    • $33.98 USD
    • 0.62
    • 1.82%
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